Nimble Storage gains more than 60 percent after IPO

SAN JOSE -- Wall Street's heavy demand for new Silicon Valley companies has not waned as 2013 draws to a close: Nimble Storage shares flashed higher Friday in their market debut, gaining more than 60 percent.

Nimble stock opened Friday morning at $31.10 on the New York Stock Exchange and continued to gain, selling for as much as $35.13 before closing at $33.93, a gain of 61.6 percent from the IPO price. That price was already elevated, as the data-storage startup originally sought a price of $16 to $18, then increased that range to $18 to $20 before bumping it $1 higher at the last minute.

"This is the beginning of the next stage of the journey for us," Nimble CEO Suresh Vasudevan said, "there's a long road ahead and it will be another fun journey as we look ahead."

Nimble Storage CEO Suresh Vasudevan, center, celebrates the company's IPO at the New York Stock Exchange on December 12, 2013 in New York City. (Photo by Caleb Ferguson/NYSE Euronext)

Nimble sold 8 million shares, raising $168 million at a valuation barely south of $1.5 billion; at $31.10, the company would have a market capitalization of almost $2.2 billion. The reward is rich for such a young company: Founded just six years ago, the San Jose firm only began shipping its enterprise products in 2010, but sales have grown fast enough for investors to salivate.

Nimble has added 1,300 customers in the past year, from midsize companies to larger customers such as Santa Clara County, with total revenues increasing 700 percent and 280 percent in the past two full fiscal years and on track to double this year.

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Profits are still just a theory at the company, though, with the first three quarters of 2013 showing a loss of $30 million on revenues of $84 million. While investment will continue to focus on top-line growth, Vasudevan said, the company expects that investment to create a "trajectory where operating income will improve over the next several years and quarters."

Data storage has been a favorite target for investors in 2013, with Sunnyvale enterprise-storage company NetApp gaining 18 percent in 2013 on Wall Street, Milpitas flash-memory company SanDisk advancing more than 50 percent, and Mountain View startup Pure Storage recently receiving $150 million in a funding round many observers consider to be the largest the industry has ever seen. Vasudevan and cofounder Varun Mehta cut their teeth at NetApp, where Mehta helped lead much of the company's early software development.

Nimble relies on a hybrid storage system that utilizes flash memory and hard disks, which Vasudevan said gives it the best of both worlds, with faster performance but lower prices.

"The ability to leverage flash and disk together to load applications faster while lowering the cost, and the ability to use the cloud to radically support" storage management systems gives Nimble an offering established companies will find hard to match, Vasudevan explained. He added that incumbent storage companies would have to start from scratch to match Nimble, and instead are just adding flash to the existing architectures, which "will not come anywhere close to matching our efficiency."

"These are multibillion dollar product lines that need a ground-up rethinking, and that is going to be hard for any large company to do," he said.

Nimble Storage CEO Suresh Vasudevan, center, celebrates the company's IPO at the New York Stock Exchange on December 12, 2013 in New York City. (Photo by Caleb Ferguson/NYSE Euronext)

Nimble's product "is not 20 percent easier to manage, it's a 10x factor. Instead of taking 10 hours, it only takes one hour to do the same task," Taneja explained, adding that it's also "way less expensive, takes less power, and performs better."

The IPO market has strong momentum heading into 2014: Before Friday's action, which included two other debuts, Renaissance Capital reported 218 companies had gone public in 2013, the highest total since 2000.

According to CB Insights' annual report, the upward trend could continue: 590 technology companies in the United States are believed to sport valuations of more than $100 million, with more than half -- 308 -- based in California. Heading into 2013, CB Insights counted 472 such companies, 57 of which went public or were acquired this year.

Nimble raised nearly $100 million in venture capital from the likes of Accel Partners and Sequoia Capital, which will each own 18.4 percent of the company after the IPO, as well as Lightspeed Venture Partners, which will own 13.9 percent. None sold shares in the company's IPO, with all the proceeds going to Nimble for general purposes.

The underwriting banks, led by Goldman Sachs and Morgan Stanley, have access to an additional 1.2 million shares, which are trading under the ticker symbol NMBL.